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Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market, and Policy Factors

The Regional Greenhouse Gas Initiative (RGGI) is a consortium of northeastern U.S. states that limit carbon dioxide emissions from electricity generation through a regional emissions trading program. Since RGGI started in 2009, regional emissions have sharply dropped. This analysis uses econometric models to quantify the emissions reductions due to RGGI and those due to other factors such as the recession, complementary environmental programs, and lowered natural gas prices. It shows that without RGGI, emissions would have been 24 percent higher. The program accounts for about half of the region’s post-2009 emissions reductions, which are far greater than those achieved in the rest of the United States.

Authors: Brian C. Murray and Peter T. Maniloff

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Climate & Energy

Environmental Economics

Climate Change Policy

Energy Sector

Modeling

States & Regions

State Policy

Journal Articles

Financing Land Use Mitigation: A Practical Guide for Decision-Makers

This report, produced as part of a U.S. Department of State-funded project by Winrock International, serves as a practical guide for those seeking finance to implement specific actions to reduce emissions from land use. It is intended to assist national policy makers and other decision makers in accessing and leveraging financial mechanisms to support activities that reduce forest greenhouse gas emissions and increase forest carbon stocks. It features an in-depth exploration of efforts to raise finance for low-emission, sustainable land use activities in Mexico and Ethiopia—two countries with ambitious REDD+ and LED goals but with widely differing natural environments, macroeconomic conditions, and institutional experience. These conditions allow Mexico and Ethiopia to offer important lessons to other countries seeking to develop low-emission and sustainable land use strategies.

Authors: Charlotte Streck, Brian Murray, André Aquino, Leslie Durschinger, Manuel Estrada, Charlie Parker, and Alemayehu Zeleke

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Adaptation

Land

Environmental Economics

Natural Resources

Sustainability

International

REDD

Reports

Assessing the Economic Contribution of Marine and Coastal Ecosystem Services in the Sargasso Sea

This report, which was revised April 2015, provides a variety of measures of the Sargasso Sea’s economic value and impact, especially net and gross revenues associated with ecosystem services supported by the sea. It captures just a small portion of these services and does not reflect their complete and total net value. Yet analysis of data on even this small portion suggests that the economic importance of the Sargasso Sea is significant. Economic expenditures and revenues directly or potentially linked to that sea range from tens to hundreds of million of dollars a year.

Authors: L. Pendleton, F. Krowicki, P. Strosser, and J. Hallett-Murdoch, Murdoch Marine

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Oceans & Coasts

Marine Ecosystem Services

Ecosystem Services

Marine

Environmental Economics

Reports

Sustainability Guidelines and Forest market Response: An Assessment of European Union Pellet Demand in the Southeastern United States

Woody biomass from the southeast United States is expected to play an important role in meeting European Union (EU) renewable energy targets. In crafting policies to guide bioenergy development and in guiding investment decisions to meet established policy goals, a firm understanding of the interaction between policy targets and forest biomass markets is necessary, as is the effect that this interaction will have on environmental and economic objectives. This analysis, featured in the journal Global Change Biology-Bioenergy, increases understanding of these interactions by modeling the response of southern U.S. forest markets to new pellet demand in the presence of sustainability sourcing or harvest criteria. Based on modeled scenarios, it finds that wood pellets from the Southeast United States could be used to meet sustainability guidelines set by the EU to achieve its larger renewable energy and greenhouse gas emissions goals. 

Author(s): Christopher S. Galik and Robert C. Abt

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Climate & Energy

Bioenergy

Policy and Design

Science

Environmental Economics

International

States & Regions

Southeast

Journal Articles

British Columbia’s Revenue-Neutral Carbon Tax: A Review of the Latest “Grand Experiment” in Environmental Policy

In 2008, British Columbia implemented the first comprehensive and substantial carbon tax in North America. By 2012, the tax had reached a level of C$30/t CO2, and covered approximately three-quarters of all greenhouse gas emissions in the province. This paper reviews existing evidence on the effect of the tax on greenhouse emissions, the economy, and income distribution as well as provides new evidence on public perceptions of the tax.

Empirical and simulation models suggest that the tax has reduced emissions in the province by 5–15%. At the same time, models show that the tax has had negligible effects on aggregate economic performance, though certain emissions-intensive sectors have faced challenges. Studies differ on the effects of the policy on income distribution but agree that they are relatively small. Finally, polling data show that the public initially opposed the tax but now generally supports it.

The carbon tax was originally implemented as a “textbook” policy, with wide coverage, few exemptions, and use of revenue for low-income tax credits and broad-based tax cuts. But the recent use of some tax revenues to support particular industries rather than to deliver those broad-based tax cuts may reduce its overall cost-effectiveness.

Authors: Brian C. Murray and Nicholas Rivers

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Environmental Economics

Climate Change Policy

Working Papers

The Clean Power Plan: Implications of Three Compliance Decisions for U.S. States

The proposed Clean Power Plan gives U.S. states flexibility in how they attain state-level carbon dioxide emissions rate goals from existing power plants. This analysis uses the Dynamic Integrated Economy/Energy/Emissions Model to illuminate the implications of three key decisions: whether to choose rate- or mass-based compliance, whether to pursue multistate or individual state compliance, and whether—if allowed in the final rule—to include new natural gas combined cycle (NGCC) units under the emissions limit. 

Regarding power sector adjustments, modeling shows that (1) a rate-based approach initially decreases coal generation 25% and increases use of existing NGCC units and construction of new renewables; (2) compared to that approach, a mass-based approach initially increases coal generation and removes incentives for use of existing NGCC and new renewables generation; (3) assumptions about renewables capital costs, energy efficiency savings, and natural gas prices significantly affect generation responses; and (4) rate-based approaches allow for more emissions growth than mass-based approaches post–2030.

Regarding policy costs, the modeling shows that (1) a mass-based approach, especially with multistate cooperation, offers large cost savings opportunities; (2) neither approach has a big effect on wholesale electricity prices, but including new NGCC units lowers prices under a rate-based approach and increases them under a mass-based approach; and (3) costs differ across U.S. regions and across the mass- and rate-based approaches within regions.

Authors: Martin T. Ross, Brian C. Murray, and David Hoppock

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Climate & Energy

Clean Air Act

Policy and Design

Environmental Economics

Energy Sector

National

Working Papers

Assessing Impacts of the Clean Power Plan on Southeast States

The proposed Clean Power Plan gives U.S. states flexibility in how they attain state-level carbon dioxide emissions rate goals from existing power plants. This analysis explores the potential impact of the proposed CPP on Southeast states across a range of compliance options relative to a baseline without the CPP. The analysis presents modeling results from the Dynamic Integrated Economy/Energy/Emissions Model for eight primary compliance scenarios involving rate-based or mass-based compliance, unilateral state action or regional cooperation, and inclusion or non-inclusion of natural gas combined cycle (NGCC) units as regulated entities under the CPP.

Regarding electricity sector adjustments, the modeling shows that a rate-based approach initially decreases coal generation, encourages use of existing and construction of new NGCC units, and incentivizes renewable generation, although use of renewables is not cost-effective in the Southeast under baseline cost assumptions. By comparison, a mass-based approach initially increases coal generation and removes incentives for use of existing NGCC units while significantly increasing new NGCC generation. Including new NGCC units under CPP compliance shifts generation from those units to existing NGCC units under mass-based compliance and increases coal generation under rate-based compliance.

Regarding policy costs, the modeling shows that individual state compliance costs vary considerably, that a mass-based approach initially entails half the costs of a rate-based approach, and that both regional rate-based and mass-based approaches create significant net cost savings over unilateral state compliance.

Authors: Martin T. Ross, Brian C. Murray, and David Hoppock

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Climate & Energy

Clean Air Act

Policy and Design

Southeast Climate

State Utility Regulation

Environmental Economics

Climate Change Policy

Energy Sector

Modeling

Working Papers

Regulating Existing Power Plants under the U.S. Clean Air Act: Present and Future Consequences of Key Design Choices

In June 2014, the U.S. Environmental Protection Agency (EPA) released its proposed rules to regulate carbon dioxide emissions from existing fossil fuel power plants, triggering considerable debate on the proposal’s design and its environmental and economic consequences. One question not addressed by this debate is this: What if the EPA regulations turn out to be inadequate to address future mitigation goals? That is, what will the landscape for future policies look like if these regulations turn out to be just an interim measure? This analysis in the journal Energy Policy compares potential short- and long-term consequences of several key regulatory design choices, including mass-based versus rate-based standards, tradable versus non-tradable standards, and differentiated versus single standards. It finds that long-term consequences may be significant in terms of the legacy they leave for future policy revisions: tradable standards lead to lower electricity prices and become weaker over time; differentiated tradable standards lead to relatively greater investment in coal retrofits; non-tradable standards lead to relatively greater retirement of coal capacity. It may be the case that key policy choices entail one set of tradeoffs if proposed EPA rules are viewed as relatively permanent and final and another set of tradeoffs if the rules are viewed as an interim solution.

Author(s): Brian Murray, William Pizer, Martin Ross

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Climate & Energy

Clean Air Act

Policy and Design

Environmental Economics

Climate Change Policy

National

Journal Articles

Incentivizing the Reduction of Pollution at Dairies: How to Address Additionality When Multiple Environmental Credit Payments Are Combined

Anaerobic digesters (ADs) can reduce waste volumes and capture methane emissions from concentrated animal feeding operations (CAFOs), but their adoption rate is low because their cost is high relative to other forms of waste management. Farmers who use ADs can attempt to sell carbon credits and nutrient credits as well as renewable electricity certificates (RECs) generated by on-site electricity production from captured methane. These credits and RECs can be used as marketable “offsets” that buyers can use to help meet their greenhouse gas and nutrient pollution reduction goals. One issue that arises is whether a single operation can sell into multiple credit markets by “stacking” credits—that is, receiving multiple environmental payments to finance the conversion to AD technology. This practices introduces the possibility that some credits might be “non-additional”—i.e., produce no incremental pollution reductions and thus be suspect pollution offsets. Non-additionality in environmental credit stacking occurs when multiple payment streams do not produce incremental pollution reductions, thus allowing the credit buyer to pollute more than is being offset by the AD project. A possible solution to the stacking problem may be to allow stacking of all credits available at the time of AD installation, but to prohibit any further stacking if new credit streams become available after installation.

Authors: Brian C. Murray and Tibor Vegh

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Environmental Markets

Policy and Design

Agriculture

Land

Environmental Economics

Energy Sector

National

Working Papers

Get the Science Right When Paying for Nature's Services

Payments for Ecosystem Services mechanisms leverage economic and social incentives to shape how people influence natural processes and achieve conservation and sustainability goals. Beneficiaries of nature's goods and services pay owners or stewards of ecosystems that produce those services, with payments contingent on service provision. Integrating scientific knowledge and methods into Payments for Ecosystem Services is critical. Yet many projects are based on weak scientific foundations, and effectiveness is rarely evaluated with the rigor necessary for scaling up and understanding the importance of these approaches as policy instruments and conservation tools. Part of the problem is the lack of simple, yet rigorous, scientific principles and guidelines to accommodate Payments for Ecosystem Services design and guide research and analyses that foster evaluations of effectiveness. The Nicholas Institute's Lydia Olander, along with other scientists and practitioners from government, nongovernment, academic, and finance institutions, propose a set of such guidelines and principles in a new Science article.

Author(s): S. Naeem, J. C. IngramA. VargaT. AgardyP. BartenG. BennettE. BloomgardenL. L. BremerP. BurkillM. CattauC. ChingM. ColbyD. C. CookR. CostanzaF. DeClerckC. FreundT. GartnerR. Goldman-BennerJ. GundersonD. JarrettA. P. KinzigA. KissA. KoontzP. KumarJ. R. LaskyM. MasozeraD. MeyersF. MilanoL. Naughton-TrevesE. NicholsL. OlanderP. OlmstedE. PergeC. PerringsS. PolaskyJ. PotentC. PragerF. QuétierK. RedfordK. SatersonG. ThoumiM. T. VargasS. VickermanW. WeisserD. WilkieS. Wunder

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Ecosystem Services

Environmental Economics

National

Journal Articles

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